WTO & Free Trade:

Making the World Safe for Corporations

By PETER MONTAGUE

What is being described as "the Protest of the Century" will take
place in Seattle, Washington, November 29 to December 3 amid
teach-ins, workshops, and strategy sessions all aiming to send a
powerful message to members of the World Trade Organization (WTO),
who will be in Seattle for the WTO's Third Ministerial Meeting.
Activists are calling for people from all nations and all walks of
life to make the journey to Seattle, to demand that the WTO change
its ways. But what is the WTO?

Although many environmental and community activists in the U.S.
know almost nothing about the WTO, in the four years since its
creation the WTO has emerged as the policy voice, the muscle, and
ultimately the fist of transnational corporations. Created by
international treaty in 1995, and now boasting 134 nations as
members, the WTO has written 700 pages of rules which add up to an
enforceable commercial code governing markets and trade world-wide --
a code enforceable not by nation-states but by the WTO itself. No
doubt about it, the WTO is a powerful new system of global
governance.

The structure of the WTO was designed by transnational
corporations, so it should come as no surprise that the WTO is (a)
radically undemocratic, fully insulated against pressure from
ordinary citizens; and (b) a vehicle for transnationals to challenge
and effectively repeal restrictions imposed on them by nation-states.
The main idea that the WTO was set up to define and enforce is "the
global free market" or "global free trade." But what is "free
trade"?

Far back in the mists of time, when humans began trading shells
and beads with each other, the first markets emerged, but such
traditional markets were never free. All traditional markets are
embedded in societies and are regulated and restrained by those
societies for the purpose of maintaining social cohesion. Familiar
societal controls on markets include such things as:

* the Roman Catholic and Islamic religions' prohibitions against
usury;

* Medieval guilds, which set minimum wages, and which set
standards and prices for goods;

* Customary prohibitions or restrictions on the sale of certain
goods, such as public spaces, sexual favors, spoiled food, and
judicial decisions, for example;

* Laws requiring government purchasing policies to give preference
to businesses run by people of a particular city or region, or by
women or minorities, or by some other identifiable group;

* Regulations requiring that products be labeled with their
ingredients or with their method of production (such as "organically
grown"), and that the labels be certifiably true;

* laws discouraging monopolies, to promote competition;

* a guaranteed minimum income, regardless of employment, traceable
to 1795 in England;

* laws requiring that production methods should protect endangered
species (for example, that shrimp be harvested by methods that do not
kill rare sea turtles);

* prohibitions against child labor;

* government ownership of certain public-service enterprises
(municipal and state hospitals in the U.S., or the oil industry in
Mexico, for example);

* limits on the length of a work day;

* restrictions on 100% ownership of businesses by foreign
nationals;

* tariffs intended to increase the price of imported goods as a
way of protecting domestic producers;

* government subsidies to promote particular industries -- for
example, planting many thousands of seedlings to assure a domestic
timber industry in the future;

* Etc., etc.

As anyone can see from this list, market restrictions can be
imposed by law, or merely by custom, with varying effects on
different members of a society. It is not possible to generalize that
all controls on markets are good or bad (though some free trade
zealots do assert that all market restrictions are unnatural and
evil).

In sum, history shows us, beyond any doubt, that, when humans
develop markets spontaneously, such markets are subject to societal
controls, which generally are aimed at maintaining social cohesion.
Governments impose market restrictions as part of their primary duty,
which is to provide security for the citizenry.

Free markets -- markets that are free of restrictions,
regulations, and encumbrances -- do not occur spontaneously. Free
markets only appear when they are engineered by the relentless
application of state power. As a historical fact, free market regimes
are extremely rare.

For a very brief period, and in one country only, a free market,
or laissez faire, regime did emerge. In the latter half of the
19th century in England, a true free market economy functioned for a
brief time. It did not occur spontaneously -- it was imposed by the
brute power of the state, and at great cost to the average citizen of
the time. (Charles Dickens wrote novels about life during this
period.) The British "free market" experiment collapsed into the
trenches of World War I and was not heard from again until the ruling
(business) class revived the idea in the late 1970s in Great Britain,
the U.S., Australia, and New Zealand. Thus, actual experience with
free market regimes is quite limited, principally because such
regimes are very difficult to establish and maintain in the face of
popular opposition. If a democracy is alive and well, free markets
soon revert to traditional regulated markets because citizens demand
and expect a modicum of security, equity, and humane treatment. Free
market regimes are arguably efficient (in the narrowest economic
meaning of that word) but the historical record demonstrates that
they are exceedingly painful and costly for ordinary working people,
incompatible with democratic institutions, and destructive of the
natural environment. History shows that, left unregulated, markets
cannot take into account that species are disappearing at
unprecedented rates, economic inequalities are growing ominously, and
the lives of families and communities are in tatters.

Now transnational corporations -- working through the governments
that they dominate -- have spent roughly 20 years exporting the "free
market" model to all the nations of the world -- a utopian experiment
in social engineering that takes your breath away for its scope,
scale, and boldness. Even the most ruthless social engineers of the
20th century -- Josef Stalin and Mao Zedong -- did not attempt social
engineering projects on the scale of the experiment that the free
traders have undertaken today. And the World Trade Organization (WTO)
is the vehicle for enforcing this colossal attempt to remake all of
the world's economies according to a single utopian idea.

In principle, WTO rules are established by consensus of all 134
members, but in practice the so-called QUAD countries (U.S., Japan,
Canada and the European Union) can meet behind closed doors and
influence the rules. Within the WTO, the QUAD countries are the
900-pound gorilla. Within the QUAD countries, transnational
corporations wield enormous influence, comparable to the influence of
the Christian Church in medieval Europe.

The WTO allows countries to challenge each other's laws and
regulations as violations of WTO rules. Cases are heard and decided
by a tribunal of three trade bureaucrats, usually corporate lawyers.
There are no rules on conflict of interest, nor is there any
requirement that the three judges have any appreciation of the
domestic laws of the countries involved. The judges meet in secret at
locations and times that are not disclosed. Documents, hearings, and
briefs are confidential. Only national governments are allowed to
participate, even if a state law is being challenged. There are no
appeals to anyone outside the WTO. Once a WTO ruling has been issued,
losing countries face three options: They can (1) amend their laws to
comply with WTO rules; (2) pay annual compensation to the winning
country; or (3) face non-negotiated trade sanctions (penalties
imposed on goods that the losing country exports to other WTO
countries).

In its short history, the WTO has already begun to repeal
environmental regulations and policies that took citizens 30 years to
enact. For example, the WTO ruled in 1998 that the precautionary
principle (see Rachel's Environment and Health Weekly #586) is
not a valid basis for restricting markets because it is
"non-scientific." When the European Union banned the sale of
hormone-treated meat within EU countries, the U.S. lodged a formal
complaint to the WTO. Despite a lengthy report by independent
scientists showing that some hormones added to U.S. meat are
"complete carcinogens" -- capable of causing cancer by themselves --
(see Rachel's #666) the WTO's three-lawyer tribunal ruled that
the EU did not have a "valid" scientific case for refusing to allow
the import of U.S. beef. The losing countries are now required to pay
the U.S. $150 million each year as compensation for lost profits.

The WTO grew out of an earlier organization called the GATT
(General Agreement on Tariffs and Trade). The GATT mainly focused on
repealing tariffs, which are taxes on imported goods intended to
protect domestic producers against foreign competition. But when the
GATT merged into the WTO, the WTO gained the new responsibility of
opposing "non-tariff barriers to trade." Non-tariff barriers to trade
include such things as food safety laws, product standards, rules on
the use of tax dollars, and investment policies.

Example: WTO has ruled that a nation cannot refuse to import goods
based on the methods by which those goods were produced because such
refusal constitutes an illegal "non-tariff barrier to trade." Thus
the WTO in 1998 declared illegal a U.S. environmental regulation
requiring that imported shrimp must be caught by methods that
minimize harm to endangered sea turtles. In 1997, the WTO overturned
part of the U.S. Clean Air Act, which prevented the import of
low-quality gasoline with a high potential for air pollution. U.S.
Environmental Protection Agency has acknowledged that this WTO ruling
"creates the potential for adverse environmental impact." Thus at the
behest of transnational corporations the WTO can -- and will --
repeal any nation's environmental protections.

Now the WTO is meeting in Seattle Nov. 29-Dec. 3 to initiate a new
round of talks, the Millennium Round. In this new phase, the
corporations that support the WTO intend to expand the WTO's power
and reach even further.

Activists are demanding that the WTO be opened up to scrutiny and
that its record of performance be formally evaluated before any new
talks begin. They see the WTO as threatening democracy, quality of
life, environmental integrity, environmental justice, and every
nation's control of its own destiny. Clearly, a titanic clash has
begun. For information about attending the Seattle protest, phone
1-877-STOP WTO.

Peter Montague is editor of Rachel's Environment and
Health Weekly, from which this is adapted. It is published
by the Environmental Research Foundation, P.O. Box 5036, Annapolis,
MD 21403-7036; web: www.rachel.org.
Recommended books on world trade and "free markets" include
Whose Trade Organization? Corporate Globalization and the
Erosion of Democracy, by Lori Wallach and Michelle Sforza
[Public Citizen, Inc., 1999], phone (202) 588-1000;
False Dawn, by John Gray [The New Press,
1998]; The Great Transformation, by Karl
Polanyi [Beacon Press, 1944]; When Corporations
Rule the World, by David Korten [Kumarian Press and
Berrett-Koehler Press, 1995]; and Corporation
Nation, by Charles Derber [St. Martin's Press,
1998]. For more information on the WTO, see The
Progressive Populist WTO page at (www.populist.com/wto.html).